Does New York’s Wage Payment Law Have a Gaping Loophole?

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The Term “Any Deduction” Is Sweeping in Its Scope, and Encompasses “Indirect” and “Constructive” Deductions

Even if one assumes a failure to pay earned wages is an “indirect” rather than “direct” deduction (a dubious assumption), the deductions barred by Labor Law § 193 are not limited to “direct,” “specific” or “payroll” deductions.  Instead, § 193 applies “any deduction from the wages of an employee” except for deductions that are authorized and for the employee’s benefit.

As the Court of Appeals has observed, “the word ‘any’ means ‘all’ or ‘every’ and imports no limitation,”[42] and “is as inclusive as any other word in the English language.”[43]  In this regard, the Second Circuit has concluded:

“[T]he word ‘any’ has an expansive meaning,” and thus, so long as “Congress did not add any language limiting the breadth of that word,” the term ‘any’ must be given literal effect.”[44]

Since the word “any” generally indicates a legislative “intent to sweep broadly to reach all varieties of the item referenced,”[45] it encompasses “indirect” or “constructive” varieties of the items referenced.   Accordingly, just as a law concerning “‘any payment’ is clearly sweeping in its scope and embraces both direct and indirect payments,”[46] the phrase “any deduction” is clearly sweeping in its scope and embraces both direct and indirect deductions.[47]

Further, Article 6’s drafters were familiar with the more restrictive term “payroll deductions” because it is found in Personal Property Law Article 3-a, which is referenced in Labor Law § 193(4).[48] But they chose not to use that more restrictive term when drafting § 193’s prohibition against “any deduction from the wages of an employee[.]”

In addition, Article 6’s substantive provisions should be liberally interpreted in favor of the employee.[49]

Finally, one must give the term “any deduction” its plain meaning to maintain the consistency of purpose between Labor Law § 193(1) and § 193(3[a]) (formerly subdivision (2)), which was added in 1974 to “prohibit wage deductions by indirect means where direct deduction would violate the statute.”[50]

The Idea That a Specific Mental State Must Be Proved to Establish a § 193 Violation

The purported distinction between deducting and failing to pay wages seems to assume the statute is violated only when the employer is shown to have acted with a culpable mental state,[51] one that apparently can only be shown by a deduction notation on a paystub.[52]  However, even employers who prove they acted in good faith are subject to Article 6 liability for unpaid wages and attorney fees (but not liquidated damages).[53]

A wage is either owed or it isn’t.  Employers have a statutory duty to provide employees with enough information to know what they will be paid for the work they perform.[54]  An employer is thus actually or constructively aware that an employee’s wages will not be paid unless certain conditions are met, and that ignoring those conditions will cause the employee’s wages to be unpaid and the employer to be correspondingly enriched by the fruits of the employee’s labor.

Even if Labor Law § 193 had an intent requirement, it is naïve to suppose an employer that enriches itself by keeping the fruits of another person’s labor does so with no intent.  “[T]he common law rule [is] that a man is held to intend the foreseeable consequences of his conduct,”[55] and it is foreseeable that an employee’s wages will not be paid if the employer fails to carefully define, keep track of, and honor its wage payment obligations.

Finally, grafting an intent requirement onto Labor Law § 193 would make § 193 incompatible with Article 6’s other provisions which contain no such intent requirement.[56]

Case Law Outside the Article 6 Context

Case law outside the Article 6 context also casts doubt on the purported distinction between deducting and failing to pay wages.  For example, in Sniadach v. Family Finance Corp. of Bay View,[57] the Supreme Court found an employer’s “interim freezing” of wages pursuant to a wage garnishment to be a “taking of one’s property [that] is so obvious[.]”[58]  If a “taking away” is a “deduction,”[59] and a temporary wage deprivation of indefinite duration is an obvious “taking,” then the permanent deprivation of one’s earned wages is an even more obvious “taking,” i.e., “deduction.”

Similarly, courts interpreting federal wage and hour laws generally refuse to distinguish between a deduction and a failure to pay.  Typical in this regard is De Leon-Granados v. Eller & Sons Trees, Inc.[60]  In holding an employer liable for willfully violating federal wage and hour laws, the De Leon-Granados Court explained that “Department of Labor officials made clear that there was no difference between deducting an expense and failing to reimburse the expense.”[61]

Likewise, a California appeals court in Grier v. Alameda-Contra Costa Transit Dist. held that “to withhold wages for work actually performed *** constitutes a deduction from wages.”[62]

[42] Zion v. Kurtz, 50 N.Y.2d 92, 104, 687, 428 N.Y.S.2d 199, 205 (1980).
[43] New Amsterdam Casualty Co. v. Stecker, 3 N.Y.2d 1, 5, 163 N.Y.S.2d 626 (1957); see also Dep’t of Hous. and Urban Dev. v. Rucker, 535 U.S. 125, 131-32 (2002) (“[T]he word ‘any’ has an expansive meaning, that is, ‘one or some indiscriminately of whatever kind.’”).
[44] Jute v. Hamilton Sundstrand Corp., 420 F.3d 166, 174 (2d Cir. 2005) (emphasis added; citation omitted).
[45] Cohen v. JP Morgan Chase & Co. ., 498 F.3d 111, 117 (2d Cir.2007) (emphasis added), citing, inter alia, United States v. Gonzales, 520 U.S. 1, 5 (1997).
[46] U.S. v. Lanni, 466 F.2d 1102, 1108-09 (3d Cir. 1972); See also Charles v. Diamond, 47 A.D.2d 426, 430, 366 N.Y.S.2d 921, 926 (4th Dep’t 1975) (law conferring jurisdiction over claims for the appropriation of “any real or personal property” extends to a claim arising out of an unconstitutional “de facto appropriation of private property”) (citation omitted); Procter & Gamble Co. v. Chesebrough-Pond’s Inc., 747 F.2d 114, 118-19 (2d Cir. 1984) (phrase “any false description or representation” in Lanham Act embraces false “innuendo, indirect intimations, and ambiguous suggestions”); Ennabe v. Manosa, 319 P.3d 201, 212, 168 Cal.Rptr.3d 440, 453, 58 Cal.4th 697, 714 (Cal. 2014) (“Use of the term ‘any’ to modify the words ‘transaction’ and ‘consideration’ demonstrates the Legislature intended the law to have a broad sweep and thus include both indirect as well as direct transactions.”); U.S. v. Quong, 303 F.2d 499, 503 (6th Cir. 1962) (“The term ‘any interest’ must be defined in the broadest sense and includes any interest whatsoever, direct or indirect.”); Grogan v. Hillman, 930 So.2d 520, 523 (Ala.Civ.App. 2005) (“Given its natural and plain meaning, the term ‘any possession’ includes ‘constructive possession.’”); State v. Bradley, 782 N.W.2d 674, 679 (S.D. 2010) (phrase “any custody” includes “constructive” custody), citing Murphy v. United States, 481 F.2d 57, 61 (8th Cir. 1973); Harris v. New Castle County, 513 A.2d 1307, 1309 (Del. 1986) (phrase “any recovery” includes “indirect” recovery of damages from a third party).
[47]  See, e.g., Martinez v. Alubon, LTD., 111 A.D.3d 500, 501, 978 N.Y.S.2d 119, 121 (1st Dep’t 2013) (“The protections of section 193 extend not only to completed deductions, but also to ‘attempted wage deductions’ that would violate the statute if consummated.”) (citations omitted).
[48]  See Personal Property Law §§ 46.2 and 48-d.  Personal Property Law Article 3-a is referred to in Labor Law § 193(4), which means that § 193’s drafters were presumably familiar with the more restrictive term “payroll deductions” and chose not to include it in § 193(1).
[49]  See, e.g., Samiento v World Yacht Inc., 10 N.Y.3d 70, 78, 854 N.Y.S.2d 53 (2008) (“[Section 196-d] should be liberally construed in favor of the employees.”); Martinez v. Alubon, LTD., 111 A.D.3d 500, 501, 978 N.Y.S.2d 119, 121 (1st Dep’t 2013) (“The protections of section 193 extend not only to completed deductions, but also to ‘attempted wage deductions’ that would violate the statute if consummated.”) (citations omitted).
[50]  Angello v Labor Ready, Inc., 7 N.Y.3d 579, 585, 825 N.Y.S.2d 674 (2006) (emphasis added; citations omitted).
[51]  See, e.g., Gold v. American Medical Alert Corp., 2015 WL 4887525, at *4 (S.D.N.Y. 2015) (conceding that § 193 “is plausibly susceptible to a broader interpretation” that encompasses as employer’s failure to pay earned wages, but rejecting that “broader interpretation” because it “would include an employer withholding the entire amount of a salary because it contends, as here, that it fired an employee for good cause.”).
[52]  See, e.g., Strohl v. Brite Adventure Center, Inc., No. 08–CV–259, 2009 WL 2824585, at *9 (E.D.N.Y. Aug. 28, 2009) (dismissing an improper deduction claim where the plaintiff alleged the defendant violated § 193 by adjusting her total hours downward as a penalty for punching in before or after her 8:00 a.m. start time because the “defendants did not ‘deduct’ any amount from [the plaintiff’s] wages, but simply failed to pay her all the wages she had earned.”).
[53]  N.Y. Lab. L. § 198(1-a).
[54]  See N.Y. Lab. L. § 195.
[55]  Radio Officers’ Union of Commercial Telegraphers Union, A. F. L. v. N. L. R. B., 347 U.S. 17, 45 (1954) (“This recognition that specific proof of intent is unnecessary where employer conduct inherently encourages or discourages union membership is but an application of the common law rule that a man is held to intend the foreseeable consequences of his conduct.”); see also Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 583, n.6 (2010) (“If a man intentionally adopts certain conduct in certain circumstances known to him, and that conduct is forbidden by the law under those circumstances, he intentionally breaks the law in the only sense in which the law ever considers intent.”).  In Jerman, the Supreme Court approvingly cited W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts 110 (5th ed. 1984) for the proposition that “[I]f one intentionally interferes with the interests of others, he is often subject to liability notwithstanding the invasion was made under an erroneous belief as to some … legal matter that would have justified the conduct[.]”  559 U.S. at 583.  Jerman also approvingly cited the Restatement (Second) of Torts § 164, and Comment e (1963–1964) for the proposition that the intentional tort of trespass can be committed despite the actor’s mistaken belief that she has a legal right to enter the property.  Id.
[56]  See, e.g., People v. Vetri, 309 N.Y. 401, 406 (1955) (construing predecessor to § 191) (citations omitted); Polyfusion Electronics, Inc. v. Promark Electronics, Inc., 108 A.D.3d 1186, 1187-88, 970 N.Y.S.2d 651, 652-53 (4th Dep’t 2013) (construing Labor Law § 191-c).  Section 194 is also a strict liability statute because it is analyzed under the same standards as the federal Equal Pay Act.  Belfi v. Prendergast, 191 F.3d 129, 135 (2d Cir. 1999).
[57]  395 U.S. 337 (1969).
[58]  Sniadach, supra, 395 U.S. at 342.
[59]  Angello v. Labor Ready, Inc., 7 N.Y.3d at 584.
[60]  581 F. Supp. 2d 1295 (N.D. Ga. 2008).
[61]  Id., 581 F. Supp. 2d at 1315; see also Arriaga v. Florida Pacific Farms, L.L.C., 305 F.3d 1228, 1236 (11th Cir. 2002) (“there is no legal difference between deducting a cost directly from the worker’s wages and shifting a cost, which they could not deduct, for the employee to bear.”).
[62]  127 Cal.Rptr. 525, 532, 55 Cal.App.3d 325, 335 (Cal.App. 1976).